When I discussed the issue of Google (NASDAQ:GOOG) Android fragmentation last year, there were two primary problems — the huge variety of devices to support and the various custom versions of Android. But the technology industry moves fast, and this year that fragmentation problem has grown a third head: hijacking.

The companies behind mobile operating systems take different approaches to their platforms. Apple (NASDAQ:AAPL) doesn’t allow other vendors to install iOS on their devices — its iPhone, iPad and iPod only. The same thing with BlackBerry (NASDAQ:BBRY) and BB10. Microsoft (NASDAQ:MSFT) licenses Windows Phone 8 to third-party vendors like Nokia (NYSE:NOK), charging a fee for each device running its OS.

Google took a completely open approach with Android. It doesn’t charge other companies to install Android on their devices, and it even allows OEMs to modify the operating system. Meanwhile, Android’s default Google apps were intended to have first crack at as much mobile ad revenue as possible. That strategy was based on the growing importance of the mobile market to the ad dollars that made up 95% of its 2012 revenue.

Give the OS away for free, keep releasing new versions, let hardware vendors make tweaks to stand out from the pack, and Android will flourish.

That has worked, in so far as Android now powers 70% of all smartphones being sold, but fragmentation is a growing threat that threatens to leave Google on the hook for Android development costs while other companies reap the financial rewards. Fragmentation also adds to Android app development costs, limits the market for apps to a subset of devices, makes for a less satisfying user experience and presents a security risk.

Let’s look at the three primary fragmentation issues Google currently faces:

Hardware and OS Fragmentation

This is the classic problem that everyone warned about from day one, and it has gotten more out of hand than anyone predicted. App developers have to account for hardware variables when building apps; the most obvious ones are display size and resolution. If your app requires a HD-capable smartphone, then your potential market isn’t all Android smartphones, it’s the percentage of those released with this display.

As Cult of Mac points out, developers for Apple’s iOS only need to support four different display sizes among currently shipping iPhones, iPods and iPads. In contrast, Samsung (PINK:SSNLF) alone currently offers Android devices with 27 different display sizes, ranging from 2.8 inches to 10.1 inches. Multiply this by different resolutions, the sheer number of Android device manufacturers and other hardware variables, and you have a nightmare scenario for app developers and consumers.

Because of compatibility issues between different devices and different Android release versions, things get even messier. The latest version of Android (Jelly Bean) is on only 13.6% of Android devices, while nearly half are running Gingerbread (circa 2010). Three other major versions also have significant representation. Compare that to Apple, where more than 80% of devices are running iOS 6 (the latest version of Apple’s mobile operating system), while 15.6% are running 2011’s iOS 5.

Android Forking

The open nature of Android means companies can essentially grab a copy, completely customize it to suit their own purposes and install it on their own devices. Amazon (NASDAQ:AMZN) did this with its Kindle Fire line of tablets; so did Barnes & Noble (NYSE:BKS) with its Nook tablets.

At one point, each of these lines was the top-selling Android tablet, but they are running highly modified older versions of Android that have all Google services removed and a custom web browser installed. They’re tied directly to Amazon’s and B&N’s own online stores for apps and shopping.

Not only did Google foot the primary development costs for the OS powering these tablets, but it doesn’t see a dime from them — not from search ads, or online purchases — unless the owners “root” their devices. And the average user is unlikely to undertake this highly technical process.

Another form of forking is alternate Android app stores. Unlike Apple’s App Store for iOS, Google Play is not the exclusive Android app store. Besides the versions offered for their own devices by Amazon and Barnes & Noble, there are also dozens of independent Android app stores that most Android users can access. Choice might be good for consumers, but these alternate sources cut Google out of the app revenue loop and introduce a security risk — who is vetting the apps that appear in all these stores?

Android Hijacking

Finally, there’s a new term showing up in the lexicon — Android hijacking — that hit the mainstream with the release of Facebook (NASDAQ:FB) Home.

We’ve written extensively about this in recent days, but in a nutshell, Facebook Home is the first wave of apps that add a custom layer over top of Android, promoting a competing service (in this case, Facebook), while burying Google’s own apps.

In other words, Facebook Home hijacks an Android smartphone, turning it into a “Facebook phone,” and effectively cutting Google out of any online ad revenue generated by the device.

Fighting Back

All three issues are known to Google, and the company has made attempts to limit the damage.

Earlier this year, Android was moved under the stewardship of Sundar Pichai, a prominent Google veteran who already had responsibility for the Chrome OS and apps. Additionally, The latest terms of service for Android include a clause forbidding actions that would “fragment” Android. However, the wording is subject to interpretation and doesn’t cover the version being curated as an open source project.

Google also has been pushing its own Nexus line of smartphones and tablets as a showcase for what a pure, unadulterated, Android experience can be. They sell well, but have hardly made a dent in the grand scheme of things.

But Google still needs to get paid, and people using Android “in these ways” means that eyeballs are leaving Google’s own apps, denying it ad revenue despite its subsidization of the platform. Even if Android’s market share grows, unless something is done, Google’s mobile revenue could shrink.

Until that solution comes, Google’s fragmentation problem is only going to get worse.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.